The old Long Beach courthouse was one of the worst in the state. Built in 1959, it suffered from fundamental flaws, was overcrowded, and failed to meet accessibility requirements, making it incapable of meeting the growing demand for court services in the Long Beach area.

When a project to replace the old courthouse was first planned, redevelopment in the city's Civic Center near the old courthouse made a replacement courthouse a good candidate for Performance-Based Infrastructure (PBI), an innovative delivery method that involves engaging a private team to finance, design, build, operate and maintain the court building.

This courthouse is the first major civic building in the U.S. to be delivered through this unique type of public-private partnership, in which the developer makes a substantial equity investment, and the public sector makes availability payments, allowing for deductions if the infrastructure does not perform to set standards. More information about PBI

The new courthouse is located on a site of six acres northwest of the existing courthouse, bounded by West Broadway, Maine Avenue, West 3rd Street, and Magnolia Avenue. The Judicial Council acquired the site from the Long Beach Redevelopment Agency in exchange for the existing courthouse and its land.

The project, completed under budget and ahead of schedule, provides for the Superior Court of Los Angeles County's high volume of criminal, traffic, civil, and family judicial proceedings. It houses 31 courtrooms, court administrative space, detention facilities, offices of related county justice agencies, and compatible retail space. A nearby parking structure has also been renovated, and surrounding streetscapes have been improved. The building's courtyard provides a secure interior open space.

In keeping with the cityscape, the design features a low-rise scheme in an L shape, one section of 4 stories, the other of 5 stories, surrounding the secure courtyard, a spacious lobby, and courtrooms with access to natural light. It extends along West Broadway, and the greatest height and bulk of the building is along West Broadway where it intersects with Magnolia Avenue. The development has a lower scale and larger setbacks along Maine Avenue and Third Street.

The courthouse was also designed for sustainability, with numerous features, including good solar design, innovative, energy-saving systems for heating and cooling, automated light-harvesting systems, and water-conserving landscaping, as well as good access to mass transit. Originally designed to achieve LEED Silver certification from the U.S. Green Building Council, the project went on to achieve LEED Gold certification at no added cost, because of the shared sustainability goals of the Judicial Council, Long Beach Judicial Partners, and the court.

The new courthouse opened for business on September 9, 2013.

The PBI arrangement made it possible to deliver a much-needed civic building with design excellence for the long term despite the lack of funds to pay for the project up front. Under the agreement, the state paid nothing until the building was occupied. The state has full ownership of the building and site and pays back on an annual basis the project’s capital costs as well as annual operating and maintenance expenses over 35 years. Deductions can be made if the facility fails to meet certain performance criteria. Expansion room for six to eight additional courtrooms will be leased to Los Angeles County for the next 15 years, with the State benefiting from the revenue and the private sector carrying full responsibility unless or until the State chooses to occupy it.

California Environmental Quality Act (CEQA) Compliance

The AOC was the lead agency for preparation of an environmental report to comply with CEQA.

Why was the Long Beach courthouse selected to be developed using performance-based infrastructure?

The existing Long Beach courthouse is among the most heavily used court buildings in California, but is among the worst in the state in terms of security and overcrowding. A replacement courthouse was prioritized by the Judicial Council as an “immediate need” in 2007. A 2007 feasibility report concluded that a public-private partnership would provide greater benefits to the state than other state-financed options. These benefits included delivering an urgently needed replacement building sooner than could be done using traditional public sector delivery methods, with no financial obligation to the state until the building was occupied. The Legislature granted authority to the state judicial branch to investigate use of this delivery method, in part so that the state could gain experience with it in public building projects, and later granted authority to the Judicial Council to use it specifically for the Long Beach court building.

Will the judicial branch use PBI for other court construction projects?

Experience gained on the Long Beach project will provide a basis for evaluating the PBI delivery method. While experience to date has been positive – construction is on schedule, on budget, and at very high quality -- it’s premature to draw conclusions about the overall cost-effectiveness of this delivery method. At this time, the judicial branch has no plans to expand use of PBI to other courthouse projects.

THE DEAL STRUCTURE

What is the nature of the project agreement? Is it a lease-buyback?

It is an agreement to finance, design, build, operate, and maintain the new court building. It is not a lease-buyback or lease-to-own arrangement, because the state owns the land and the building throughout. Once the building is occupied by the court, the state will pay an annual service fee based on building performance, meaning that deductions can be made when court space or functionality are unavailable or other predetermined performance criteria are not met.

What is the length of the service agreement?

The agreement extends for 35 years, starting when deal was signed (December 2010).

How much will the annual fee be?

The annual fee will start at approximately $50 million, which includes the costs to design and construct the new building, the cost to finance the project, and the cost of operations, utilities, maintenance, and life-cycle renewal of building elements as they reach the end of their useful service life. The operating and maintenance cost component of the annual fee is subject to annual increases based on the Consumer Price Index, should they occur. However as noted above, the amount of the fee depends on building performance, so the fee could be less depending on the amount of any deductions.

How was the project agreement finalized and approved?

From 2008 to 2010, the Administrative Office of the Courts (AOC) worked with the state Department of Finance (DOF) and the state Legislature’s Joint Legislative Budget Committee (JLBC) at several stages of project development. DOF approved terms and conditions at several stages, and the AOC took several further validation steps in response to concerns raised by JLBC. DOF ultimately approved project agreements in December 2010 allowing them to be signed by the AOC and the project company.

What are the anticipated benefits to the state of this arrangement?

There are numerous benefits in PBI delivery of the new courthouse:

The new courthouse will greatly improve access to justice for Long Beach area residents and working conditions for judicial officers and court staff, and these improvements will come an estimated 14 months earlier than would have been possible under traditional state building delivery processes.

Upon completion, this building will be maintained at a high quality level throughout the 35-year agreement. This arrangement instills a discipline of long-term maintenance into a public building.

The state pays no money until the court occupies the building.

After the courthouse is completed, and the state begins its service fee payments, there is no impact on the state’s credit limit and no additional state debt is created.

The pay-for-performance scheme gives the state leverage over the private-sector project company.

The building plan enables county justice partners to be co-located within the building, which is atypical for new state buildings.

Space initially leased to third parties provides room for future court expansion if needed. Room for expansion is also atypical in new state buildings. Income from this leased space reduces the state’s service fee.

Restaurants and retailers will operate concessions in the courthouse, saving the state the cost of operating a cafeteria

Through this project, the state gains experience with this innovative project delivery method.

Risks of delivery and operation are transferred to the private sector. As such, the state’s payments do not increase if the project is delivered behind schedule, if there are construction cost overruns, if interest rates go up, or if a third party lease tenant moves out.

THE VALUE FOR MONEY ANALYSIS

What is the purpose of the Value for Money analysis?

According to the State Legislative Analyst’s Office, “The purpose of a VFM analysis is to determine whether a particular proposal submitted by a private sector developer would be cheaper to build and operate than a public sector project. Such an analysis takes into account the nominal cost of a project, which is then “discounted” over time to determine the project’s cost in net present value terms. In other words, because the expenditures take place over several decades and the timing of the expenditures differ between the PBI approach and the public sector approach, the comparisons are adjusted to account for the fact that money available at the present time is worth more than money available in the future.” This is a standard methodology used to analyze PBI projects. The VfM analysis considers capital costs, financing costs, operations, maintenance, and the benefits of transferring risks like cost overruns to the private sector.

What did the VfM analysis conclude?

When all costs and risks were compared, PBI delivery of this project compared favorably with the public sector comparator, yielding a modest savings of $26 million, or 3.5 percent. The net present value cost of PBI delivery of this project was $725 million, vs. $751 million for the public sector comparator.

What’s the benefit of having done this analysis?

The value for money analysis assisted in the decision process leading up to project approval, establishing that this particular project was a suitable candidate for PBI and that this delivery method had the potential to create value for the state’s money. During procurement, the VfM analysis provided a benchmark against which the various private sector proposals received were measured. During finalization of the project agreement, the VfM analysis provided a negotiating tool with the selected project company, in committing to a price that would deliver value for the state.

Who performed the analysis?

The AOC worked with external financial advisors Ernst & Young and Davis Langdon for elements of the VfM. The analysis was thoroughly reviewed by the Department of Finance at several points.

The VfM attaches a dollar value to various risk categories in comparing the two procurement methods. Why?

This type of risk analysis is standard methodology for major infrastructure projects and for VfM comparisons. Risk analysis is necessary to identify the whole cost of the project and to capture how the private sector accounts for risk.

How were those risk values arrived at?

Risks were identified, allocated, and assigned probabilities and impacts by expert teams during a series of risk workshops. Values were determined through computer modeling using industry-standard modeling software.

How was it determined that the private sector could complete the building 14 months faster than the typical public-sector process?

The private-sector project company has used a fast-track process that overlaps certain aspects of design with construction. This type of fast-tracking is typically impossible with traditional public sector building delivery methods, because each phase must receive approvals from a variety of state agencies before the next phase can begin, adding many months to the process. Construction is also proceeding on a fast schedule. For example, steel erection began within a year of the notice to proceed. For a public building of this size and complexity, it would have typically taken at least two years to reach this milestone using traditional delivery methods.

The VfM analysis states the comparative cost of this project as $725 million. Is that the estimated total the state will pay over 35 years?

No, it is a figure used for comparison purposes in the value for money analysis that assigns a net present cost to the project’s total life-cycle costs.

The AOC selected three teams through a request for qualifications, then issued a request for proposals to the three teams. The AOC evaluated the three teams' proposals based not only on compliance with the Judicial Council's construction requirements, but also on their financial value, quality of architectural and urban design, environmental consciousness, and operational efficiency.

How did the AOC ensure that local businesses benefit from the project?

The project team performed extensive outreach to ensure that local contractors, subcontractors, and materials suppliers were aware of how to qualify for subcontractor bidding on the project.

What kind of relevant experience does the selected architect have?

The architect who is part of the project team, AECOM, has a distinguished portfolio of public buildings that have enriched the Southern California communities in which they were built. Sample projects include:

How did the AOC ensure that the new courthouse is built on time and within budget?

The AOC's PBI contract includes incentives and penalties that drive performance by the project developers. Additionally, benchmarks that allow for ongoing monitoring of contract performance are built into the agreement. The project was completed ahead of schedule and under budget.

Who owns the new building ?

The state owns the land and the building throughout the agreement’s term, and at the end of 35 years, will continue to retain title. The PBI project company is expected to maintain the building throughout the 35-year agreement and then turn over the court building and parking structure to the AOC at the end of the term.

SITE

The site for the new courthouse is closer to residences and a school. How will the new courthouse affect the neighborhood?

We expect the new courthouse will make a positive contribution to the Civic Center's redevelopment. The site is essentially one city block northwest of the existing courthouse. The building's design is consistent with contemporary courthouse design and environmental standards, and its scale will be compatible and consistent with nearby office buildings. To manage pedestrian traffic and security, the only public entrance will be oriented to the corner of Magnolia and West Broadway, essentially two blocks from the school. Community safety will be among the highest priorities for the architects, engineers, and project managers working on the building. Security features will include a secured below-ground sallyport (which enables sheriffs to drive prisoner buses into a secured area to transfer in-custody detainees into and out of the courthouse); separate hallways and elevators for the public, staff, and in-custody detainees; and courtroom holding cells, which minimize movement of in-custody detainees within the court building.

Will relocating the courthouse change how prisoners are transported to and from the courthouse?

The sheriff's department currently transports detainees by bus between the county jail and the existing courthouse. This will not change with the new building. The new building will have a more efficient bus entry and exit scheme, eliminating some current traffic problems caused by buses exiting the existing court building. The sheriff's buses will use West Broadway to enter the new building's secured area and West Third Street to exit the new courthouse.

What about parking?

The project included renovation of the Magnolia Street Garage, adding approximately 225 parking spaces. The project also include some on-site parking for commercial and retail tenants. For security and access reasons, on-street parking will be prohibited at the street curbs directly adjacent to the new building during business hours on weekdays.

What happens to the old courthouse after the court moves into the new courthouse?

The AOC acquired the project site from the Long Beach Redevelopment Agency in exchange for the existing courthouse and its land. The redevelopment agency informed the AOC that the city has no intention of occupying the old courthouse building. The city will announce plans for the old building site at a later date.

Reports and DocumentsEvaluation of Cost Effectiveness (6/30/14)This report to the Legislature, required by Senate Bill 75 in 2013, finds the cost of this project comparable to the closest similar project in size and scope delivered through the traditional capital project delivery process